HALIFAX – DHX Media has kicked off a “cost-reduction program” to reverse disappointing fourth quarter and year-end results for the period ended June 30, 2017.
While Q4 revenues of $87.6 million grew 16% from $75.3 million in the same period last year, they were lower than expectations due to a lack of execution and timing differences in the content business, lack of execution on licensing for the Teletubbies in the U.S., and lower than expected consumer products-represented revenues. In absolute dollars, the increase in Q4 2017 was due to continued strong growth in Wildbrain, seasonally high production service revenues, and growth in distribution revenues, offset by declines in DHX Television and consumer products-represented revenues, reads the company’s news release.
The kids content producer, distributor and broadcaster reported a net loss of $18.3 million for the quarter, compared to a loss of $1.7 million year-over-year, while adjusted EBITDA of $23.67 million was down 5% from $24.8 million for Q4 2016.
DHX Television saw revenues fall 18% to $12.9 million from $15.8 million in the same period last year. “The decline was below Management's quarterly expectations as promotion and advertising revenues were lower than expected and additionally, the Company recognized certain ancillary revenues, which it had expected to recognize on a gross basis, on a net basis, resulting in a $1.80 million reduction in revenues”, reads the release.
Revenues for Fiscal 2017 were $298.7 million, down 2% from $304.8 million for Fiscal 2016. The company said that the decrease was due to a reduction in proprietary production revenues, accounting for $6.42 million of the decrease; a reduction in consumer products-represented revenues, accounting for $9.96 million of the decrease; a decrease in DHX Television revenues, accounting for $11.75 million of the decrease; a decrease in consumer products-owned revenues, representing $0.10 million of the decrease; and a decrease in digital revenues, accounting for $1.75 million of the decrease, offset by higher distribution revenues, representing $13.85 million of the offset; and an increase in producer and service fee revenues, accounting for $10.03 million of the offset.
DHX Media CEO Dana Landry said that the company has realigned its management team to streamline production, restructure licensing activities and to focus on projects with the potential to drive multiple revenue streams. It also recently initiated a cost-reduction program, and has reduced SG&A expenses by $3 million towards a target of $6 million within one year.
“We believe the market for content is extremely robust and growing, worldwide”, Landry said in the release. “Our restructured integrated platform will enable us to monetize our leading portfolio of kids' and family content for a compelling value proposition as major streaming companies commit billions to grow their content budgets. Fiscal 2018 is off to a positive start with a multi-year royalty deal for Peanuts with Cedar Fair amusement parks. In addition to the SG&A reduction, integration on Peanuts is on track to achieve $5 million in targeted, first-year cost synergies. We have sharpened our focus with renewed energy for creating content and driving consumer products to generate free cash flow and EBITDA as the main measures of sustainable growth."
